Labour champions ‘Brummie Bonds’ “breakthrough”

A pledge to build more homes has taken a “major step forward” following a multi-million pound deal between Birmingham city council and a leading institutional investor, according to West Midlands Labour.

Midlands-based pensions and life assurance specialists Phoenix Life, which employs around 600 people in Wythall, has agreed to invest in a ‘Brummie Bond’ and will lend the Labour-run council £45 million at “favourable” rates of interest.

The money will go towards home building, helping to deliver a key pledge made by Labour council leader John Clancy to tackle the housing crisis.

The interest rate the council will pay to borrow the money is lower than that charged by the Public Works Loan Board (PWLB), which means the council will pay £1.4 million less in interest over the course of the loan than would have been the case had it borrowed from the PWLB, says Labour.

Council sources suggest that if other council PWLB loans could be converted to bonds, the local authority could save millions on current interest payments.

Leader of Birmingham City Council, Councillor John Clancy said:

It is clear that the agreement we have reached with Phoenix Life represents a vote of confidence in Birmingham City Council by the private sector.

With this council’s budget facing relentless austerity cuts, we must be more imaginative in identifying ways to generate funding to bring homes and jobs to Birmingham. I am determined that the Brummie Bonds programme will go from strength to strength.

This council won’t raise the white flag of surrender. To make us less reliant on rapidly shrinking Government grants, we’ll go out and bring in millions of pounds of investment that would normally go to London markets.

Typically, this is Birmingham doing what it does best. Buckling down, being pragmatic. Brummies are doing it for themselves.

The development of new forms and sources of capital has long been a key feature of Cllr Clancy’s policy platform. He will be hoping this deal contributes to killing two proverbial birds with one stone – giving confidence to the Birmingham Independent Improvement Panel that the council is addressing its financial challenges and that Cllr Clancy can deliver on his key social commitment – tackling the housing crisis.

Phoenix Life’s Chief Executive, Andy Moss said:

I am delighted that as such a major employer in the Midlands, we have been able to provide this support to the local council whilst ensuring diversification in our investment portfolio. We hope to continue investing in our local community in the future.

Today’s announcement was issued by West Midlands Labour as the council is in the midst of a ‘purdah’ period. The news from the council leader will also be seen as giving his friend Siôn Simon a helping hand in his close fought campaign to become the first West Midlands Mayor.

Liam Byrne, Member of Parliament for Birmingham Hodge Hill and chair of Mr Simon’s campaign for West Midlands Mayor, added:

When Labour is in power we can achieve real change for the people of our city. This announcement from the Labour Council, alongside the commitment of Siôn Simon as Labour’s candidate for West Midlands Mayor, is a huge step towards ending the Tory scandal of homelessness in our city.

Jack Dromey, Member of Parliament for Birmingham Erdington, a former shadow housing minister and now under threat in the General Election, added:

I want to see every Brummie realise their dreams to buy or rent a home at a price they can afford. The Tories have let Birmingham and Britain down, with housebuilding falling to its lowest level since the 1920s. Building homes for Birmingham will also create thousands of jobs and apprenticeships.

The Government-approved Birmingham Development Plan says that some 89,000 new homes will be required for Birmingham citizens by 2031. Birmingham is building more new council houses than any other local authority. The Birmingham Municipal Housing Trust (BMHT) has built over 2,000 new homes for sale or affordable rent since 2009, with plans for up to 500 homes for affordable rent also in place.